Canada Mortgage Calculators

Understanding Key Canadian Mortgage Concepts

How Canadian Mortgages Compare to the US and Other Countries

Canadian mortgages have several unique features compared to the US and other major countries:

• Shorter Terms: Most Canadian mortgages have a 5-year term (not 15 or 30 years fixed like in the US). After the term, you must renew at current rates.
• Amortization: The total repayment period is usually 25 or 30 years, but the interest rate is only guaranteed for the term (e.g., 5 years).
• CMHC Insurance: Required for down payments under 20%. This protects the lender, not the borrower, and adds to your costs.
• Prepayment Penalties: Canadian mortgages often have stricter penalties for paying off your mortgage early compared to the US.
• Stress Test: Borrowers must qualify at a higher interest rate than their contract rate, making it harder to qualify for large loans.
• Land Transfer Taxes: Most provinces charge a land transfer tax, which is rare in the US.
• Limited Tax Deductions: Mortgage interest is not tax-deductible for your primary residence in Canada, unlike in the US.
• Fewer Lenders in the North: In territories like Yukon, Nunavut, and NWT, there are fewer lenders and less competition than in southern Canada or the US.

In the US: 30-year fixed-rate mortgages are common, mortgage interest is tax-deductible for most homeowners, and there is no federal land transfer tax. The US market is larger and more competitive, with more lender options and products.

Globally: Many countries require higher down payments, have variable-rate mortgages, or shorter amortization periods. Canada’s system is considered conservative and stable, but can be less flexible than the US.

What is the First Home Savings Account (FHSA) in Canada?

The First Home Savings Account (FHSA) is a registered savings plan introduced by the Canadian government to help first-time home buyers save for a down payment. The FHSA combines features of both the RRSP and TFSA, offering tax-deductible contributions and tax-free withdrawals for qualifying home purchases.

• Eligibility: You must be a Canadian resident, at least 18 years old, and a first-time home buyer (not owned a home in the past four years).
• Contribution Limit: Up to $8,000 per year, with a lifetime maximum of $40,000 per person.
• Tax Benefits: Contributions are tax-deductible (like an RRSP), and qualifying withdrawals (including investment growth) are tax-free (like a TFSA) when used to buy your first home.
• Carry Forward: Unused contribution room can be carried forward to future years (up to $8,000 per year).
• Qualified Withdrawals: Must be used to purchase a qualifying home in Canada within 15 years of opening the FHSA.
• Combining with RRSP Home Buyers' Plan: You can use both the FHSA and the RRSP Home Buyers' Plan (HBP) for the same home purchase, maximizing your down payment savings and tax advantages.

FHSA Example

If you contribute $8,000 per year for 5 years, you can save $40,000 in your FHSA. If your investments grow, all gains can also be withdrawn tax-free for your first home. For a couple, this means up to $80,000 plus investment growth can be used for a down payment, tax-free.

Why Use the FHSA?

• Accelerate your down payment savings with tax-free growth.
• Reduce your taxable income with deductible contributions.
• Combine with other programs like the RRSP Home Buyers' Plan and provincial first-time buyer rebates for maximum benefit.

Tip: Open your FHSA as soon as you are eligible to start accumulating contribution room, even if you are not ready to buy a home yet.

For more details, visit the official Government of Canada FHSA page.

Frequently Asked Questions